Former HealthSouth CFO talks to Tulane business students about workplace ethics

The former chief financial officer of HealthSouth, the Alabama health care company that became embroiled in a corporate accounting scandal eight years ago, had a message for Tulane University business students this week: Stay true to your principles. In a frank discussion about his time at HealthSouth, the pressure he was under from CEO Richard Scrushy to find ways to exaggerate the company's earnings, and the three months he served in a minimum security prison, Aaron Beam warned students about the ethical challenges he said many of them will face in the workplace.

Aaron Beam, the former Chief Financial Officer at HealthSouth, spoke to Tulane University business students on ethics this week.

"There are ethical dangers out there in the work force that you need to know about," Beam said during his lecture. "It will happen to you, and you can fall into the trap.

"You have to stand by your principles and ethics."

Beam said the pressure he felt to manipulate HealthSouth's finances came directly from Scrushy, who insisted that the numbers be twisted. But he also said that even companies with angelic CEOs face unbelievable pressure from Wall Street.

"Once you're a public company, you're really measured by how the stock does, Beam said. "As a CFO, the pressure to please the Street with good earnings is tremendous."

His advice to students heading into the world of corporate accounting? "Pay attention to your gut reaction. Pay attention to your instincts," he said. And perhaps most important, stand firm if you're asked to fudge the numbers.

Caught up in the success

That's something Beam acknowledges he wasn't always able to do.

Beam, who turns 68 this month, helped found HealthSouth in 1984. Two years later, the Birmingham company issued its first shares of stock to the public. And by 1995, according to Beam, HealthSouth was the largest company in the state of Alabama with 50,000 employees.

Beam was rewarded handsomely by the company's early growth and success.

"I went out and almost immediately bought a Mercedes," he said. Beach houses, a French Quarter condominium, and $100 Hermes ties soon followed.

"It changed me," Beam, a Louisiana native and LSU graduate, said of the money.

But the money also raised the stakes at work, where CEO Richard Scrushy was also becoming hooked on his new-found wealth and was busily snapping up mansions, planes, boats and expensive vehicles. Strangely, Scrushy was also pouring money into a country western band he founded, Beam said.

"Richard Scrushy was obsessed with being wealthy. He wanted to be the richest man in Alabama if he could," Beam said. "He wanted (HealthSouth) stock to keep going up so he could become a billionaire."

'I was a coward'

As time went on, it became more difficult for HealthSouth to deliver the profits Scrushy kept promising Wall Street. And though Beam pleaded with Scrushy to allow the company's finances to be honestly reported, he ultimately acquiesced to demands that he repeatedly manipulate financial reports to exaggerate profits.

Beam also wrote a book about his experience at HealthSouth â âHealthSouth: The Wagon to Disaster.â

"I should have stood up to Richard and said no. But I was a coward. I was intimidated by Richard," Beam said. "I couldn't imagine being the one to let his net worth go down by several hundred million."

Beam said the guilt he felt as a result of the company's ongoing financial manipulation weighed heavily on him.

"For the first time in my life, I didn't enjoy coming to work," he said. "I felt trapped."

So he retired at the age of 54, sold nearly all of his HealthSouth stock, and focused on building a large new home with his wife in south Alabama.

"When I first retired, every time my phone rang or the doorbell rang, I thought it was the FBI," Beam said.

Behind bars and beyond

That day eventually came, but it wasn't the ring of a doorbell or a phone that alerted him about the investigation. Years later, news of the HealthSouth accounting scandal broke on television. After seeing the story, Beam volunteered to share what he knew with federal agents and ended up testifying at Scrushy's trial. Scrushy was accused of using intimidation to coerce top executives into committing fraud. He was acquitted on all 36 counts, but he was subsequently convicted on separate charges of bribing the Alabama governor and is currently in prison.

Beam spent three months in a Montgomery, Ala., prison, a term shortened by his cooperation with prosecutors. After finishing his sentence, Beam opened his own lawn care business. "The job market for felons is not real good," he said.

Beam also wrote a book about his experience at HealthSouth -- "HealthSouth: The Wagon to Disaster" -- and now lectures on ethics to business students and groups around the country.

He urges students who are preparing to enter corporate America to examine the companies they're interviewing with and ask about a firm's internal controls and corporate compliance.

It's important to pay attention to gut reactions, said Beam, who had suspicions about Scrushy from the very beginning.

Beam also urges listeners to reconsider their definition of success.

"We were greedy," Beam told the Tulane students this week. "Having a bigger house and more cars than your neighbor is not success."

Kimberly Quillen can be reached at kquillen@timespicayune.com or 504.826.3416.